Comments on: US Treasury Secretary says growth will be hit by financial crisis http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/ Conservative Party Member of Parliament for Wokingham Tue, 14 Oct 2008 03:00:11 +0000 http://wordpress.org/?v=2.6.2 By: Andrew Batt http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5036 Andrew Batt Mon, 20 Aug 2007 05:46:22 +0000 http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5036 The consequences are being felt far from the US. Here in Thailand the impact of events in the United States is being felt in the economy, and that's just part of globalization. The consequences are being felt far from the US. Here in Thailand the impact of events in the United States is being felt in the economy, and that’s just part of globalization.

]]> By: Steven_L http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5018 Steven_L Sun, 19 Aug 2007 18:43:10 +0000 http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5018 I think there is an interesting 'compare and contrast' situation between health and safety law and the subprime problem. Risk aversion, failure to apply common sense and greed and vested interests by health and safety professionals lead to illogical and sometimes idiotic decision-making that inevitably costs the consumer more money. Institutionalised risk-aversion in the financial sector, failure to apply common sense and the greed of mortgage salesmen have led to what is obviously an bad idea (i.e. allowing packaging up dodgy mortgages as CDO's and credit derivatives and building up these mountains of dodgy debt to the point that banks are too paranoid to lend money to each other) that will inevitably cost the consumer more money. I think that in order to learn from this the financial sector and their regulators have to sit down and discuss the issues of risk, the spreading of risk through all these credit derivatives, responsible lending and the creation of a desirable level playing field that facilitates free trade but punishes recklessness. It's all well and good spreading the risk throughout the globalised markets, but if no-one seems to know what the consequences regarding the overall risk to the world economy are the whole thing just becomes a joke. I'm no economist or financial expert, but I read what the economists and financial experts are saying. They seem to disagree with each other about what is going to happen. I refer to my comments a few weeks ago that predicted in the long run that there will be inflationary pressures from rising energy prices and a weakening I think there is an interesting ‘compare and contrast’ situation between health and safety law and the subprime problem. Risk aversion, failure to apply common sense and greed and vested interests by health and safety professionals lead to illogical and sometimes idiotic decision-making that inevitably costs the consumer more money.

Institutionalised risk-aversion in the financial sector, failure to apply common sense and the greed of mortgage salesmen have led to what is obviously an bad idea (i.e. allowing packaging up dodgy mortgages as CDO’s and credit derivatives and building up these mountains of dodgy debt to the point that banks are too paranoid to lend money to each other) that will inevitably cost the consumer more money.

I think that in order to learn from this the financial sector and their regulators have to sit down and discuss the issues of risk, the spreading of risk through all these credit derivatives, responsible lending and the creation of a desirable level playing field that facilitates free trade but punishes recklessness.

It’s all well and good spreading the risk throughout the globalised markets, but if no-one seems to know what the consequences regarding the overall risk to the world economy are the whole thing just becomes a joke. I’m no economist or financial expert, but I read what the economists and financial experts are saying. They seem to disagree with each other about what is going to happen.

I refer to my comments a few weeks ago that predicted in the long run that there will be inflationary pressures from rising energy prices and a weakening

]]> By: Tony Makara http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5005 Tony Makara Sun, 19 Aug 2007 11:35:32 +0000 http://www.johnredwoodsdiary.com/2007/08/19/us-treasury-secretary-says-growth-will-be-hit-by-financial-crisis/#comment-5005 The market has to be able to expand and contract naturally in line with market forces. The debt has to be ironed out and if that means screwing the lid on growth so be it. In the long term the specter of inflation is far more troublesome than a transient downturn in the economy. There can be no doubt that the problems stemming from the sub-prime crisis are going to be felt worldwide, including the UK, and this will compound with our own debt-fuelled economy. Central banks must step back and allow events to unfold. The attemps to artificially manage liquidity will faciliate inflation in the long-term. The market has to be able to expand and contract naturally in line with market forces. The debt has to be ironed out and if that means screwing the lid on growth so be it. In the long term the specter of inflation is far more troublesome than a transient downturn in the economy. There can be no doubt that the problems stemming from the sub-prime crisis are going to be felt worldwide, including the UK, and this will compound with our own debt-fuelled economy. Central banks must step back and allow events to unfold. The attemps to artificially manage liquidity will faciliate inflation in the long-term.

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